The Conscious Parallelism of Wolf Packs: Applying the Antitrust Conspiracy Framework to Section 13(d) Activist Group Formation
By William R. Tevlin
Section 13(d) of the Williams Act requires all persons and groups that acquire 5 percent or more of an issuer’s outstanding stock to disclose their holdings to the Securities and Exchange Commission. Whether a group is formed under section 13(d) often is unclear. The legal precedent is ambiguous; courts give more weight to certain forms of circumstantial evidence than others without explaining why. With the substantial increase of hedge fund activism—in particular, the wolf pack tactic—further clarity or uniformity is necessary. A “wolf pack” is a loose association of hedge funds that employs parallel activist strategies toward a target corporation while intentionally avoiding group status under section 13(d).
Rather than develop a new rule, courts should apply the antitrust conspiracy framework from section 1 of the Sherman Antitrust Act. The antitrust precedent identifies conscious parallelism and plus factors as evidence of price-fixing conspiracies. It is based on statutory language, and courts are familiar with the precedent, largely because the case law is similar to section 13(d) law. This Note provides a survey of the modern section 13(d) group formation landscape and addresses certain forms of circumstantial evidence that apply to the wolf pack strategy. This Note then advocates that courts should apply the antitrust precedent to section 13(d) as a two-part solution: first by utilizing conscious parallelism and second by considering novel plus factors. Finally, this Note suggests plus factors that would be useful in identifying when wolf packs form 13(d) groups while avoiding overpunishing those wolf packs.